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ECHO ENT (EGP)

The Company operates Star City Casino in Sydney, Jupiters Hotel and Casino on the Gold Coast, Treasury Casino & Hotel in Brisbane and Jupiters Townsville. The Company also manages the Gold Coast Convention and Exhibition Centre and the Townsville Entertainment and Convention Centre (in which the Company has a partial interest).

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The fate of the company that runs Sydney’s only casino will be decided by two billionaire gaming moguls after James Packer ousted chairman John Story from the Echo Entertainment board, and Malaysia’s KT Lim emerged as a key shareholder.

In a dramatic day that could reshape the $3.7 billion Australian casino sector, Mr Story fell on his sword just nine days after Crown said it would seek an extraordinary meeting to remove the veteran director and appoint Jeff Kennett as its representative.

Mr Story did not go willingly, but accepted the view of other Echo directors that Mr Packer’s aggressive and personal public campaign against him “was damaging to the company”. Sources close to the Echo board told the Weekend Financial Review that some directors, including chief executive Larry Mullin, were also concerned about Echo’s corporate strategy and Mr Story’s toxic relationship with NSW Premier Barry O’Farrell over the handling of a sexual harassment scandal at its Sydney casino, The Star.

Crown, which owns 10 per cent of Echo, dropped its request for the meeting after Mr Story’s resignation and the appointment of director and Australian Rugby Union boss John O’Neill as Echo’s acting chairman.

Mr Packer told the Weekend Financial Review he would still push to have Mr Kennett join the Echo board, adding it would be best done with the support of other directors.

“I’m completely committed to Jeff Kennett becoming a director of Echo. He would be terrific for all shareholders,” he said.

“Our position remains unchanged in that we would not support a Crown representative on the Echo board,” Perpetual head of equities Matt Williams said.

“We have had disagreements with Mr Story in the past but he should be commended for the way he stood up to Crown in the last few months under intense personal attack.

“We hope John Story’s resignation goes some way to repairing the relationship that has deteriorated with the NSW government and regulators.”

Mr Story declined to comment. He has argued that the Crown campaign was part of attempts to gain control of Echo’s licences without paying a premium to investors.

In a statement, Mr Packer welcomed the appointment of Mr O’Neill and said he looked “forward to the Echo board now restoring the company’s relationship with its key stakeholders, including the NSW government”.

Mr O’Farrell was furious that on the eve of an inquiry into The Star, Echo admitted releasing emails to The Australian and The Daily Telegraph to combat what it described as “a sustained media campaign being waged against The Star’’. The stories contributed to the resignation of the Premier’s chief of communications, Peter Grimshaw, whose girlfriend was one of the women who had complained about Mr Vaikunta’s behaviour.

Echo blamed the negative publicity surrounding the harassment scandal for an earnings downgrade last month.

State government support is critical for Echo as The Star’s gaming licence comes up for renewal in 2017. Mr Packer, whose business owns Crown casinos in Perth and Melbourne, wants to build a six-star hotel and casino development in the Barangaroo precinct in Sydney’s central business district.

Mr Packer is keen to tap into the lucrative Chinese tourism market and argues that Sydney lacks a world-class hotel.

Mr Packer has said he would rather push ahead with the development with the support of Echo but is prepared to compete for the licence when it is up for renewal. Mr Packer has applied to the NSW and Queensland governments – Echo owns the Jupiters casino on the Gold Coast – for approval to increase Crown’s stake beyond the 10 per cent mark.

Mr Packer cannot afford to launch a full takeover of Echo without diluting his 48 per cent stake in Crown and has indicated he is more likely to emulate his friend, Seven West Media chairman Kerry Stokes, by exerting control over a company with a shareholding of about 20 per cent.

This objective became more complicated on Friday when it emerged that Mr Lim’s Genting casino empire had taken a 4.9 per cent stake in Echo through investment bank JPMorgan.

Genting, which used JPMorgan for two deals recently, is sitting on a $S3.4 billion war chest but will also need state government approval to lift its stake in Echo above 10 per cent. Malaysian-born Mr Lim and Mr Packer have met previously and it seems likely the two billionaires would consider striking an alliance.

Crown’s stake in Echo makes an outright takeover of it by Genting difficult.

Genting owns and operates casinos around the world, including 48 boutique casinos in the UK, Resorts World in New York and the massive Sentosa in Singapore. The market capitalisation of parent company Genting Berhad is $11.5 billion, almost twice that of Crown at $6 billion.

Mr Packer has publicly said he admires the sprawling Sentosa development, which took $S2.75 billion in revenue and $S1.42 billion in earnings before interest, taxation, depreciation and amortisation over the full year and has helped drive up tourism to Singapore. Genting is familiar with Australia, having been a founding shareholder in Perth’s Burswood casino (now Crown).

Echo shares closed 4.4 per cent higher on Friday at $4.49 on hopes that Genting would bid for the company.